Short Lease on property purchase

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    Short Lease on property purchase

    I am a first time buyer and I'm interested in purchasing a property that has 71 years left on the lease. Alongside my deposit for the house I do not have enough cash to extend the lease immediately. The leaseholder has indicated they want £50k for the extension which seems to be a fair price based of local property values and the selling price of the property. My aim would be to either extend my mortgage after several years to pay for the lease extension or to save enough cash over a few years to pay it. Question - is it a risky move to purchase a property with such a short lease and not extend immediately?

    #2
    I don't think that you would be able to get a mortgage with a lease that short.

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      #3
      My mortgage brokers believes I will get it approved. I'm just concerned that if i do buy the house and dont extend the lease now the freeholder will be holding me over a barrel

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        #4
        The mortgage term would possibly be limited to a maximum of 21 years and even if it were slightly longer the capital & Interest repayments would be highly significant and as such would possibly bust the affordability assessment. If your broker hasn’t cautioned you on this vital matter I would question his knowledge; obviously I don’t know your financial circumstances but as a 1st time buyer in the current climate there is considerable constraints on meeting the affordability assessment even on a 35 year term

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          #5
          £50K for lease extension on a house seems to be a lot to pay . Is it in London Zone 1-6 ?

          The free guide to cost of buying the freehold title for leasehold house shows more modest prices :

          https://www.lease-advice.org/advice-...ses-valuation/

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            #6
            The property is in London zone 2. I did check the lease extension calc here and seems to confirm that 50k is approx. cost to extend: https://www.lease-advice.org/calculator/
            The house needs some work and was planning to do some of that prior to applying/paying for lease extension. If I did that would it increase the premium the freeholder will charge to extend the lease?

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              #7
              I should point out that if the target property is a "leasehold house", you should be buying the freehold title under the "1967 Leasehold Reform Act". The free guide shows an example for Leasehold house with 65 years remaining term with market value at £120,000, the cost of the freehold would come to £7,140 approx.

              You say the freeholder is asking £50K for lease extension , are you planning to buy a leasehold house priced at £850K ( = 7 x £120K ) ???

              ( Lease extension under the Leasehold Reform , Housing and Development Act 1993 applies to "leasehold flats".)

              Comment


                #8
                No, it's a 2 bed leasehold flat - the asking price is 500k, other flats on the road are selling for between 550-600k.

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                  #9
                  Lease website has a guide to rough cost for lease extension :

                  https://www.lease-advice.org/advice-...ion-valuation/

                  It shows an example of flat with 68 years remaining and market value at £150K. the calculated cost came to around £10,700 . the cost may be lower for flat with 71 years term remaining. So you should be looking to pay roughly around £35K

                  But the leasehold rules require you to wait 2 years before you can seek statutory lease extension. But If you can persuade the mortgage lender to help, you could ask the "seller" to serve the legal notice for lease extension.

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